why woyld a market shut down or produce

Expert Solution

A firm decides to shut down its production when the revenue earned from the production of goods and services are not able to cover the cost of production, which is variable. Thus in such a situation, the firm will have to face more money loss if it produces goods and services than if it does not produce any goods and services. If the firm reduces their production, it will also cause financial loss to the firm. Thus only option is to shutdown the firm. That means, to stop production completely.

If the firm is deciding to decrease its production, the variable cost cannot be covered by the revenues earned from goods and services. But if it shuts down its production, it will have to face only loss of fixed costs.

If at the profit maximizing point when marginal revenue is below average variable cost, shut down occurs. Shutdown does not mean that the firm is quitting the business. It is only for temporary. When the situations improve, it will again start producing. Thus shut down are decisions made only for short run.

Rahul Sunny answered 2 years ago

In the short run, a perfectly competitive firm will shut down and produce nothing if: a....

In the short run, a perfectly competitive firm will shut down and produce nothing if: a. economic profits equal zero. b. total cost exceeds total revenue. c. total variable cost exceeds total revenue. d. the market price falls below the minimum average total cost.

Should the firm shut down in the short-run? Explain in detail why or why not.

Explain why a perfectly competitive firm will shut down in the short run if price is...

Explain why a perfectly competitive firm will shut down in the short run if price is lower than average variable cost but will continue to produce if price is below average total cost but above average variable cost. In long-run competitive equilibrium, P = MC = SRATC = LRATC. Because P = MR, we can write the preceding condition as P = MR = MC = SRATC = LRATC. The condition thus consists of four parts: (a) P = MR,...

In Egypt, why was the Mubarak regime's efforts to shut down social media after protests began...

In Egypt, why was the Mubarak regime's efforts to shut down social media after protests began not successful in preventing further protests? Why was availability and use of social media critical to the Arab uprisings?

18. A firm should shut down in the short run if:

18. A firm should shut down in the short run if: a. price is greater than average variable costs b. average fixed costs are greater than marginal revenue c. price is less than average variable costs d. total costs are greater than fixed costs 19. A firm is said to be making profits when: a. marginal revenue exceeds marginal costs. b. marginal revenue exceeds variable costs. c. average revenue exceeds average total...

1. Explain why perfectly competitive firms have to shut down in both short and long run.

At a price of $10, and assuming the price doesn't increase in the future, should the firm continue to produce in the short-run or shut down in the short-run?

Quantity Total Revenue Marginal Revenue Total Cost Marginal Cost Fixed Costs ATC Average Fixed Costs Average Variable Costs 0 0 - 10 - 10 - - - 1 8 24 14 24 2 16 34 10 17 3 24 42 8 14 4 32 49 7 12.25 5 40 57 8 11.4 6 48 67 10 11.17 7 56 81 14 11.57 8 64 99 18 12.38 9 72 123 24 13.67 At a price of $10, and assuming the...

Whether or not it is moral for the government to force businesses to shut down during...

Whether or not it is moral for the government to force businesses to shut down during the pandemic using utilitarianism.

Even though NPV, breakeven analysis, Schiller’s P/E, shut down can be to make decisions, why are...

Even though NPV, breakeven analysis, Schiller’s P/E, shut down can be to make decisions, why are they not used? What are limitations of these techniques? (reply in 400 words)

A monopolist will shut down in the short run if: a. total revenue is less than...

A monopolist will shut down in the short run if: a. total revenue is less than total variable cost. b. price is less than marginal revenue. c. marginal revenue is less than price. d. total revenue is less than total fixed cost. e. marginal revenue is less than marginal cost. A movement from an abnormally high rate of unemployment toward a more typical level of unemployment would: a. move an economy from a point on the production possibilities curve to...

Question